Jurisdiction spotlight: Singapore

Today, we will take a look at the jurisdiction to which Hong Kong is perhaps most often compared: Singapore.

History

Singapore, with its strategically important location, has a rich history as an important trading hub connecting Europe and Asia.

Recorded history starts around the very end of the 1200s. The city was then known as Temasek, meaning Sea Town.

The origin of the name Singapore is Sanskrit for Lion City. A legend dated to the 1400s says that a prince from Palembang (Indonesia) was out hunting when he saw an animal he had never seen before, and the city of Simhapuram was founded.

Owing to its position in the Malacca Strait, the city quickly became a port of call for all sea-faring nations. Sailing through the Strait of Malacca was – and to this day remains – preferred to taking the long route south of Sumatra.

During the 1500s through the 1700s, Singapore was under Portuguese and then Dutch influence. Its role as a vital trading hub continued during this time.

In 1819, Stamford Raffles, the British Lieutenant-Governor of Bencoolen in Sumatra arrived in Singapore to seek out a new location for a trading port, in part motivated by the opium trade. This began the founding of modern Singapore.

The Dutch had for long held back the British presence in the peninsula by charging very high fees for their docks. This ended when the British took over what is Singapore today with the help of soldiers from India. With Singapore freed from the poorly-run Dutch operations, other trading nations sought themselves to the new British territory. This was one of many catalysts in the demise of the Dutch colonization in the region.

Singapore thrived as a British colony and grew quickly, as a part of group of territories known as the Straits Settlements, of which it was the de facto capital and center. Today, all of the Straits Settlements are a part of Malaysia, except for Singapore and the Australian territories of Christmas Islands and Cocos Islands.

In 1942 during World War 2, Japan occupied Malaya (including Singapore) and several surrounding territories. Singapore remained occupied until Japan surrendered at the end of the war.

Immediately after the war, Singapore was in a brief period of semi-anarchy. The British regained control of Singapore by 1946 and by the following year, the economy was up and running again.

With many colonies seeking independence after the end of World War 2, movements for self-governance were growing in Singapore during the late 1940s and early 1950s. The British conceded various forms of independence with complete self-governance being granted in 1959.

In 1963, Malaysia proposed that Singapore join as a state of Malaysia, owing to the strong economic ties. Singapore was a part of Malaysia for less than two years, when it exited the union following racial tensions and various disagreements.

The Republic of Singapore was formally founded on the 9th of August, 1965.

Since then, Singapore has continued tremendous economic growth. It has not been involved in any major international incidents and enjoys good relations with all of its neighbours and the international community. There are some minor disputes with Malaysia over fresh water supplies and its free trade zones – as with all FTZs – have been criticised for being a potential smuggling ground.

In recent years, the government has taken steps to mitigate risks of Singapore being used for laundering money. Its banking secrecy has been lifted somewhat in order for authorities to access banking information under certain conditions.

Singapore is a financially sound country with a very business-friendly climate. There are human rights concerns, though, which will be addressed further down.

Singapore Companies

Singapore companies are relatively easy to form but costs tend to be higher than for example Hong Kong since a resident director is required. Most service providers charge around 2,000 SGD per year for this service. This can be a significant sum of money for a small entrepreneur but for an established business it shouldn’t be a major hurdle.

The standard corporate tax is 17%, which is below the international average (which is circa 23.5%) but is not the zero percent sought by many entrepreneurs. There are several tax rebates and exemptions available, which can reduce the effective tax rate quite generously for new or small companies. Certain financial services sectors are subject to lower tax rates, typically in the range of 5 – 12%.

Dividends are exempt from tax.

As with all reputable jurisdictions, companies are required to maintain records and submit an annual return. Companies with a revenue of greater than 5 million SGD must be audited.

Generally speaking, forming a company in Singapore is not as attractive to a non-resident as forming a company in Hong Kong or even Labuan. The costs can be prohibitive and the tax rate is comparatively high.

However, as a resident, forming and running a Singaporean company is very easy and efficient. The country repeatedly rank at the top of the Ease of Doing Business rankings set by The World Bank and IFC.

Singapore’s other strengths lie in an impressive 77 DTAs (as of writing), highly responsive government, stellar e-government services, and its good reputation. It is also a major shipping port, with three Free Trade Zones (FTZ).

The most common is the private company limited by shares. It is also the only company form that is attractive to non-residents. LLPs, for example, require two resident members and must be operated and managed from Singapore.

Banking in Singapore

Banking is where Singapore truly shines. While its formerly completely impenetrable banking secrecy (section 47 of the Banking Act) has been softened some, it still maintains a banking secrecy comparable to Switzerland, with authorities having access to bank account information only under very specific circumstances.

While the global trend is diminished banking secrecy and Singapore is working hard to not be a money laundering hub, Singaporean banks are successfully diversifying their offering and compete on quality and stability rather than secrecy. Private banking has grown immensely with local banks, Asian banks, and several European banks attracting wealthy clients.

No Singaporean bank has ever failed and the banks’ as well as government’s risk averse disposition makes a financial collapse of Singapore or any of its banks unlikely. Foreign-owned banks may of course be subject to financial troubles such a bank might face elsewhere.

Fees are relatively low when compared to the tropical islands of the Caribbean and in line with or slightly higher than Europe. In return, you get excellent quality and services.

Opening a bank account remotely is almost exclusively reserved for wealth management starting at one or a few million EUR/USD/SGD.

It is sometimes possible to open a corporate bank account for a Singaporean company by having the resident director go to the bank and apply for an account. However, if you plan to open a bank account in Singapore, you should realistically factor in a trip to Singapore as a part of the process. Fortunately, Singapore is well-connected.

While Singaporean banks do accept offshore companies (including IBCs), they are more selective than banks in many other jurisdictions. They expect a legitimate reason for banking in Singapore, a good business plan, and overall a real business behind it. Offshore companies used as pure tax evasion vehicles will not be accepted.

Personal accounts are easier to open but many banks have tightened the requirement, asking for minimum deposits in the range of 10,000 – 50,000 SGD.

Numbered accounts are available but with today’s compliance requirement, your identity will be known to the bank and authorities can compel the bank to disclose it. The secrecy of numbered accounts is regulated by section 57 of the Banking Act.

Living in Singapore

Personal income tax goes from 0% to 20%. Income received from abroad is exempt from tax.

There is no tax on capital gains, inheritance, or wealth.

Singapore is also interesting to live in for cultural reasons. Akin to Hong Kong, it is a melting pot of Asian cultures with western influences.

The tiny island city-state is well connected, being a major hub in and of itself and being close to other major hubs, such as Hong Kong and Kuala Lumpur. Infrastructure in Singapore is absolutely top notch.

It is a very clean and safe country. There are very strict laws in place and enforcement is swift and efficient. This may sound intimidating at first but as long as you behave civilly and respect the local customs, it won’t affect you. There is a mandatory death penalty for certain narcotics related crimes and foreigners are not exempt.

Singapore is sometimes described as a soft totalitarian state. Freedom of press and freedom of speech are severely hindered when it comes to political topics. Most Singaporeans tolerate this as the government tends to act benevolently. It’s a unique culture and one that may clash with the mindset of many foreigners.

It can get very warm and humid, but the city-state boasts excellent, air-conditioned public transport. Unless you specifically decide to, you will not be subject to the natural weather for any longer periods of time

However, for all its strong selling points, being granted residence permit in Singapore is not easy.

Final Words

Although an excellent country for banking and living, Singapore lacks incentives for non-residents to form companies. It’s a great place to be if you run a local company or have the means to settle in through investment.

It is one of the world’s finest banking jurisdictions, home to many of the largest and/or best banks in the world. Minimum deposits are a little bit higher than many other offshore jurisdictions but the quality justifies this.

Further Reading

See Also

On another note…

A few days ago, I decided to give running a forum a shot. Head over to https://www.streber.st//forum/ to join. If you already have an account to comment on blog posts, the same log in should work for the forum as well.

9 Commentson "Jurisdiction spotlight: Singapore"

So an applicant would withhold, from the jurisdiction, the names of the shareholders and directors and UBO (ultimate beneficial owner)? Or the information would be required to be revealed, by law, to the jurisdiction, but the jurisdiction would withhold the information from other “jurisdictions”? Important difference.

This (and your other comment) were posted as replies to the Singapore article, which I have a feeling is out of context and not where you intended to post, so I don’t understand the context for this comment. Could you please clarify?

You wrote in reply to John Smith: “While you can find jurisdictions that withhold the names of shareholders for certain company types, IBC jurisdictions are some of the few that also withhold names of directors and are probably what you’re looking for here.

….they can vary quite a bit but the Ras al-Khaimah (RAK) offshore company is probably the one worth looking into the most.”

In that context, and in regard to IBC’s, I wrote: “So an applicant would withhold, from the jurisdiction, the names of the shareholders and directors and UBO (ultimate beneficial owner)? Or the information would be required to be revealed, by law, to the jurisdiction, but the jurisdiction would withhold the information from other “jurisdictions”? Important difference.”

In jurisdictions where the government doesn’t know the UBO of companies, the liability to know is shifted to someone else which can be anything from a registered agent (usually the case in IBC jurisdictions), a company secretary, or some other type of custodian who can be called upon by the government to release information about ownership.

Whether the UBO information is withheld when requested by another government depends on what EOI mechanisms are in place. If there is a TIEA or a modern DTA (which contain EOI mechanisms) and the government in the requested jurisdiction is able to request and pass on the information, the UBO will become known to the requesting jurisdiction. Otherwise not.

Hi, amazing blog, pretty much the only one that gives inside information from someone with a lot of experience.

Do you have any advice for my situation? I’m an IT freelancer looking for a good jurisdiction. Currently considering Singapore, Hongkong and BVI. I don’t want to be tied publically to the company for tax reasons so Hongkong is out I think. Singapore is relatively expensive but easier to form IT-related companies. BVI is perfect apart from the uncertainty of getting a bank account for this kind of business (low income compared to big companies). Any suggestions? #1 concern is bank privacy and no public record on my name.

Belize, Bahamas, Seychelles etc are also an option but have a bad rep these days so not sure if they’re worth it. Europe is not an option because of the (possible future) agreements among the members of the EU. (I’m from Europe)

If you seek a jurisdiction that completely lacks public records, Singapore is not a good option. It has public records that show more or less the same as Hong Kong, including directors and shareholders.

While you can find jurisdictions that withhold the names of shareholders for certain company types, IBC jurisdictions are some of the few that also withhold names of directors and are probably what you’re looking for here.

The more reputable ones are the British Overseas Territories (TCI, Anguilla, Cayman Islands, and so on), Mauritius, and UAE. In the UAE, you have a plethora of different jurisdictions to incorporate under and they can vary quite a bit but the Ras al-Khaimah (RAK) offshore company is probably the one worth looking into the most.

You’re laying out a roadmap for where the U.S.A. should apply pressure points in the future! Regarding RAK, in your List of Jurisdictions, only two services are listed for it: TL and LTC. Not IBC or OBU. I presume “offshore company” is an OBU.

OBU is an Offshore Banking Unit, which is on a high level similar to an IBA (International Banking Act) but legally different in that they usually aren’t completely cut off from the domestic banking sector and there’s a greater interchange of resources/transactions between the two. It’s a tricky concept and as I state on the top of the page, “this list is extremely unreliable due to unavoidable inaccuracies when comparing laws across jurisdictions”. The OBU of Taiwan is quite different from the OBU in the Philippines, and it’s a stretch to call what Panama has a proper OBU.